Reversible tyrosine phosphorylation, regulated by the coordinated actions of protein tyrosine kinases (PTKs) and protein tyrosine phosphatases (PTPs), is of critical importance to signaling events that underlie virtually all essential cellular processes. Not surprisingly, disturbance of the balance between PTK and PTP activity leads to aberrant tyrosine phosphorylation, causing many human diseases, including cancer. The long-term objective of the proposed research program is to develop small molecule therapeutics targeting SHP2 (Src homology 2 domain-containing phosphatase 2), which is the first bona fide oncogene identified in the PTP superfamily. SHP2 is required for Ras/ERK1/2 activation downstream of most receptor tyrosine kinases, cytokine receptors, and integrins. In addition, gain-of-function SHP2 mutations are known to cause the autosomal dominant disorder Noonan Syndrome, multiple forms of leukemia and solid tumors. Consequently, SHP2 represents an attractive anti-cancer and anti-leukemia target. Unfortunately, PTPs are exceptionally challenging targets for drug discovery, due primarily to the highly positively charged nature of the PTP active site. Indeed, almost all existing PTP inhibitors contain negatively charged nonhydrolyzable phosphotyrosine mimetics, and suffer poor membrane permeability and cellular efficacy. In order to overcome the bioavailability issue, we have developed a breakthrough chemistry platform based on bicyclic salicylic acid pharmacophores that are sufficiently polar to bind the PTP active site, yet remain capable of efficiently crossing cell membranes. We have acquired an indole salicylic acid based SHP2 inhibitor II-B08, with a low 5M affinity for SHP2 and several fold preference for SHP2 over a panel of mammalian PTPs. Moreover, II-B08 exhibits outstanding cellular activity. However, the potency and selectivity displayed by II-B08 are relatively modest, and are inadequate for chemical biological investigation and therapeutic development. To move forward, we have obtained a three-dimensional structure of SHP2 in complex with II-B08, which reveals molecular determinants that can be exploited for the acquisition of SHP2 inhibitors with enhanced properties. In this proposal, we will apply a structure-guided focused library synthesis strategy to optimize II-B08 into highly potent and selective SHP2 inhibitors. We will also evaluate the cellular efficacy, therapeutic potential, as well as mechanism of action of the SHP2 inhibitory agents. The multidisciplinary research program utilizes techniques in synthetic and combinatorial chemistry, high-throughput screening, enzyme kinetics, cell biology, signal transduction, site-directed mutagenesis, and X-ray crystallography. Successful completion of this project will create a solid foundation upon which novel agents targeted to SHP2 can be developed for individuals with hematologic malignancies and cancer. In addition, potent and selective SHP2 inhibitors will also serve as powerful research tools to delineate the function of SHP2 in normal physiology and to elucidate the events underlying SHP2-evoked transformation.